Financial, sales-revenue and profit reversals usually correlate with brand damage, though not necessarily to a serious extent. The public is often sympathetic to market conditions and we have seen many retailers struggling through, without permanent brand damage.
However some forms of damage can be more serious and enduring, and recently we have seen poor Tesco stumble from one hole to another. Sales revenue damage was compounded by mishandling possibly questionable management activities.
It’s probably a good time to consider the five major categories of brand damage in the light of the benighted retailer’s problems.
1. Market environment damage
Sometimes no blame can be attached to the organisation for issues beyond its control. Particularly political and legislative changes can impact business and the brand and the company may be trapped in negative activity,
Cultural and technological issues can also have damaging impacts. However, it can be argued that a well-managed brand should be constantly monitoring the market environment to remain in touch and relevant.
2. Accidents, incidents and events
Traffic police often say ‘There are no accidents, only incidents’ – the inference being that all accidents are avoidable. Events can be seriously and often terminally damaging.
We can look at the brand damage following in the wake of BP’s catastrophe in the Gulf of Mexico, or Toyota’s string of recalls. These ‘events’ are rarely blameless and damage is inevitable – the distinguishing feature is how a brand faces up to such a catastrophe. Openness, acceptance and swift responses can do much to restore a brand’s reputation where denial, obfuscation and attempts to cover up will only compound the problem.
3. Neglect, complacency and hubris
This kind of brand damage often follows a period of undoubted success. It is where a brand sits back, assumes that it has arrived at its place in the sun and believes it has a right to its position. This often leads to the previous form of brand damage as complacency dulls the belief that ‘something might go wrong’.
In the Tesco example, for decades the business was hardworking and innovative – a pioneer of online shopping, exploiting multi-channel trading and pushing the boundaries of a food market retailer. Did it grow fat, lazy and complacent? It has been suggested that part of the malaise was not being sufficiently sensitive to economic and market changes, and lack of clarity in its brand positioning – leading to shrinking market share.
In such a case, there is often an emotional disconnection – a complacent brand, like a complacent person, stops reaching out and the important emotional bond with the audience is damaged.
4. Incompetence and mishandling
It goes without saying that incompetence in brand management will be penalised. Well-meaning fumbling may not be taken too seriously if the brand has sound core values, however.
Mishandling is often the product of misunderstanding what is important. We have already looked at damage due to events and incidents. These are typical areas where a strong hand on the tiller is required to handle the aftermath.
We have recently seen the tragic events surrounding the Virgin spacecraft test-flight – we also witnessed the exemplary way Richard Branson responded. A stark comparison with Tesco’s response to falling figures.
5. Malpractice, malfeasance and dishonesty
This type of serious brand damage is the result of the actions of individuals or groups within a business. It may be rogue elements or it may be with the approval and complicity of management. We have seen examples of corrupt individuals in the financial sector – here swift action from the board can go some way to mitigate the potential damage. In other cases is may be institutional malpractice – here brand damage can spread beyond individual organisations to whole sectors.
Sometimes this can strike at the very core values of a brand and the damage may be terminal. The example which springs to mind is that of Anderson Consulting and the Enron scandal. The implied brand value of probity was brought into question and the result was the demise of a brand.
We wait to see if this type of damage was involved in the Tesco episode. If so, we can expect a costly and crippling degree of brand pain. Perhaps for a grocery retailer corporate rectitude is not a core value, but we can be sure other brands will be queueing up to fill the moral void.